Smt. Kala Rani v. Commissioner Of Income-Tax, Patiala-I

J.V Gupta, J.:— In these two references, under s. 256(1) of the I.T Act, 1961 (hereinafter called “the Act”), relating to the assessment years 1968-69 and 1969-70, the following two questions of law have been referred for our opinion:

“1. Whether, on the facts and in the circumstances of the case, the assessee could be regarded as owner of the house property in question as contemplated in section 22 of the Income-tax Act, 1961., for the assessment years 1968-69 and 1969-70?

2. Whether, on the facts and in the circumstances of the case, and having regard to the sale deed executed on April 11, 1969, the Tribunal was right in law in holding that the income from self-occupied property was rightly included as the assessee's income from house property for the assessment years 1968-69 and 1969-70?”

2. The answer to question No. 2 depends on the answer to question No. 1.

3. The facts giving rise to these references are these. The assessee is an individual. The previous years relevant to the assessment years 1968-69 and 1969-70, ended on March 31, 1968, and March 31, 1969, respectively. By an agreement dated March 17, 1964, between Shri Pran Nath Bhatia (the vendor), the assessee (the vendee) purchased plot No. 192, street “K” Sector 18-C, Chandigarh (R.P No. 980), measuring 500.05 square yards along with certain superstructure in the nature of filled foundations and incomplete structure of garage, bathroom and W.C for a consideration of Rs. 11,000. A loan of Rs. 12,000 sanctioned by the Punjab Govt, for the construction of the house over the aforesaid site was also transferred to the vendee. The assessee undertook the construction of-the house and the same was completed in May, 1967. The sale deed was executed by the assessee and the vendor on April 11, 1969. On the ground that the assessee had become the owner of the property only during the accounting year 1969-70, relevant to the assessment year 1970-71 by virtue of the registered sale deed, income from the self-occupied property was not shown for the assessment years 1968-69 and 1969-70. The assessee actually occupied the said house during the previous years relevant to the assessment years 1968-69 and 1969-70. With a view to bring to tax the income from the self-occupied property, notices under s. 148 of the Act, were issued by the ITO for both the years as assessments for both these years had already been completed. In compliance with the notices, the assessee filed returns for both these years on March 1, 1973. It was claimed that as the assessee was not the owner of the property in question the income from the self-occupied property was not required to be included in the assessments. This plea of the assessee was not accepted by the ITO. Consequently, he taxed the income from the self-occupied property at Rs. 1,604 for the assessment year 1968-69 and at Rs. 2,096 for the assessment year 1969-70. The assessee also failed before the AAC in appeal. A further appeal before the Income-tax Appellate Tribunal, Chandigarh Bench, filed on behalf of the assessee, was also dismissed by the Tribunal, vide its order dated January 31, 1975, giving rise to the reference of the above questions of law to this court. The learned counsel for the assessee contended that unless the sale deed, dated April 11, 1969, was executed, the assessee did not become the owner of the property as contemplated under s. 22 of the Act, which is as follows:

“The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property, as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head, Income from house property”

4. According to the learned counsel, the mere possession of the property, in pursuance of an agreement to sell, is not sufficient to burden the assessee with tax oh any income during that period under s. 22 of the Act. In support of this contention, the learned counsel relied upon a judgment of the Andhra Pradesh High Court in Cit, Hyderabad v. Nawab Mir Barkat Ali Khan Bahadur ., [1974] Tax LR 90. On the other hand, the learned counsel for the revenue argued that the fact that the assessee actually occupied the said house during the previous years relevant to the assessment years 1968-69 and 1969-70 was never disputed, and it has been further found by the Tribunal that there cannot be any doubt in this case that, after the completion of the building, the assessee was in a position to earn income from the property in question, and that in view of these findings, the ratio of the Supreme Court judgment in R.B Jodha Mal Kuthiala v. CIT, [1971] 82 ITR 570 was applicable to the facts of the present case.

5. After hearing the learned counsel for the parties, we are of the considered opinion that the matter now stands concluded by the final court.

6. In R.B Jodha Mal Kuthiala's case, [1971] 82 ITR 570, 578 (SC), it has been observed thus:

“But the real question is, can that right be considered as ownership within the meaning of section 9 of the Act. As mentioned earlier, that section seeks to bring to tax income of the property in the hands of the owner. Hence, the focus of that section is on the receipt of the income. The word ‘owner’ has different meanings in different contexts. Under certain circumstances, a lessee may be considered as the owner of the property leased to him. In Stroud's Judicial Dictionary, 3rd edition, various meanings of the word ‘owner’ are given. It is not necessary for our present purpose to examine what the word ‘owner’ means in different contexts. The meaning that we give to the word owner in section 9 must not be such as to make that provision capable of being made an instrument of oppression. It must be in consonance with the principles underlying the Act.”

7. Thus, it cannot be accepted that before a person can be assessed u/s. 22 of the Act, he must be the owner by virtue of a sale deed in his favour. As a matter of fact, what is being taxed under s. 22 of the Act is the income from house property or the annual value of the property of which the assessee is the owner. As observed by the Supreme Court in the above-said case, the focus of the section is on the receipt of the income from the house property. If in a given case, it is found as a fact that the assessee is in occupation of the building as owner to all intents and purposes, except the sale deed in his favour, then, he is liable to income-tax under s. 22 of the Act. In the present case, it has been found as a fact that the assessee did occupy the said house after the execution of the agreement to sell dated March 17, 1964, in his favour, and he was in a position to earn income from the property sold to him.

8. Apart from that, from the copy of the sale deed, dated April 11, 1969 (annex. “D”), it is quite clear that everything was paid earlier at the time of the execution of the agreement to sell dated March 17, 1964, and no payment was made at the time of the execution of the sale deed (annex “D”), the relevant paragraph of which reads:

“And Whereas by an agreement dated 17th March, 1964, the vendor named above agreed with the purchaser for the sale of the property cited above for a sum of Rs. 19,400 (rupees nineteen thousand four hundred only) and received the whole of the consideration money excluding the loan amount which the purchaser agreed to pay to the Estate Office direct in lump sum or in instalments, as the case may be, from the purchaser, Smt. Kala Rani, daughter of Shri Matu Ram, S.C.F No. 14, Sector 18-C, Chandigarh, as detailed hereinafter and delivered the physical possession of the said property to the purchaser and allowed her to construct and complete the building thereon as per approved plan at her own costs and expenses.”

9. The judgment of the Andhra Pradesh High Court in Nawab Mir Barkat Ali Khan's case, [1974] Tax LR 90 does support the contention of the learned counsel for the assessee, but in view of the decision of the Supreme Court in R.B Jodha Mal Kuthiala's case, [1971] 82 ITR 570 (SC), the same cannot be accepted for the correct interpretation of s. 22 of the Act. In this view of the matter, the answer to both the questions, referred to above, are in the affirmative, that is, in favour of the revenue and against the assessee.

10. The references stand answered accordingly. No costs.